De-dollarization is the process of the world relying progressively less on the US dollar for the many functions it currently serves– a unit of account, common exchange medium, and the world’s primary reserve currency. More and more countries are moving away from the dollar in favor of other currencies and methods of international trade, giving way to the question of whether the reign of the dollar has finally come to an end.

The Past: Gold to Greenbacks

For centuries, European colonial powers used precious metals, namely gold, as a backing for their currencies in addition to faith in the stability and strength of the state. After the dust settled over the rubble left behind by World War II, while all the Allies indeed won, the US emerged as a lone true victor, being mostly unscathed physically and economically by the fighting, it confidently assumed its role in the political and economic power vacuum left behind. The US and its currency thrived while others merely survived the world wars. The ensuing Bretton-Woods Agreement solidified the USD as the global standard reserve currency by tying exchange rates to it, taking the place of the sterling, signifying a new center of economic power and ushering in the age of the domination of the dollar.

The dollar grew into its new station, becoming more and more common as the world became more globalized. A strong factor as to why the dollar has continued to be dominant is the globe’s massive volume of trade, especially oil trade. No other currency is presently plentiful enough to sustain such a sizable total value that is required for ease of transactions with a common currency. The “petrodollar” system has wildly increased the demand for US dollars. In order to keep the world’s lights on and other energy needs met, the amount of currency needed is massive to keep up with the volume of the trade of just the energy industry, let alone everything else. Despite having various other benefits, there is presently no other currency suitable to usurp the place of the dollar.

The strength of the dollar and the US government working in tandem created an internal momentum to keep them both in power. A strong USD allows for greater purchasing power for borrowing and lower import costs for the US, allowing them to gain power elsewhere in the world.

The Present: Greenbacks to Globalism

On April 2nd, 2025, Donald Trump took the spotlight on the world stage once more by announcing sweeping, bold tariffs that sent shockwaves through US and international economies alike with a similarly bold title of “Liberation Day”. Even though the Trump Administration has backpedaled significantly from the initial plan, the upheaval alone has impacted markets significantly even before it took effect. Credibility from power and stability is what allows fiat currencies like the dollar to thrive and facilitate economic progress. This credibility is crumbling with each seemingly impetuous tariff on everywhere from the uninhabited Heard and McDonalds Islands to the British Indian Ocean Territory that houses no permanent population, but only a military base. The most shocking number is China, facing up to a 245% tariff as a result of a long process of tit-for-tat tariffs. The trade partners have long since had a strained relationship, but now the ever-looming trade war seems to be coming to fruition. This turmoil that the world has witnessed rapidly unfolding may challenge the US’ status as a financial safe harbor for reliable investment. This increasing lack of faith in the US dollar has been brought to a head in recent times when the mere announcement of the aforementioned vast tariffs sent markets into free fall. In this new US administration, trade is a zero-sum game. There are only two sides: winners and losers, not mutually benefitting partners.

In response to this erratic economic policy, many countries have sought to decrease their reliance on the dollar and increase use of local currencies to make the global political landscape more decentralized and multipolar after the prolonged American dominance the world has seen for so many years. A prominent example of this is Vladimir Putin’s remarks on the status of the dollar at the 2024 BRICS Summit, “The dollar is being used as a weapon. We really see that this is so. I think that this is a big mistake by those who do this,”

Investors are increasingly being afforded more options other than the dollar to invest. Other currencies are becoming more developed and reliable while the dollar is backed by a government with a capricious governing strategy, producing an opposite effect. As the dollar wanes, other currencies’ potential waxes. The newest world order will likely see a shift away from the western-dominated landscape that has been the norm for so many years.

The Future: Globalism to… Growth?

Now let’s start with the hypotheticals. So, what comes next? Renowned economist Jeffery Sachs says on the subject, “The share of the United States in the world economy will be less and the role of the U.S. dollar will naturally diminish, because other currency settlements will take a hold,” painting a pessimistic future for the dollar. He attributes this to three things: a smaller share of the US economy in the global market, weaponization of the dollar, and the rise of central bank digital currencies. The following will dig deeper into each of those points.

Under the Trump Administration, US economic policy is guided more by the ideas of isolationism, non-interventionism, and other Monroe Doctrine-esque policies. For instance, in his first term as president, Trump removed US armed forces from Afghanistan, where the US military had been located for so many years. He has withdrawn the US from other international organizations and agreements like the World Health Organization, the Paris Climate Agreement, the Iran Nuclear Deal, the UN Human Rights Council, and UNESCO. Trump is isolating the US from much of the rest of the world.

The US wields considerable leverage over its trading partners, small and large alike, because it possesses the currency that ties the whole global economic machine together. If a country gets on the US’s diplomatic bad side, it has the ability to take these funds if they store reserves in dollars, which was seen in Venezuela, Russia, and Iran. After Russia launched its attack on Ukraine, the US, European Union, and other western countries denied it the ability to utilize the dollar payment system that it controls called the SWIFT System, which is the world’s largest system for international settlements and payments. This largely denied Russia ease of access to the entirety of the international market. This is only one of many instances of sanctions imposed against them by the US. Things will fundamentally change if the US no longer has that ace in hand at all times. Its political and economic status has allowed it to throw its weight around, effectively shaking smaller countries down for their lunch money on the playground. That status is progressively fading as other countries gain their footing in the world and, like BRICS, are able to find strength in numbers and shared economic and social positions. Economist Richard Wolff says on the subject, “The United States can’t any longer manage the world the way it once did, so it is abusing its role as the neutral caretaker for the world’s currency by becoming a partisan user of its position.”

Sachs predicts that, in the future, payments will be made via central bank digital currencies (CBDC), a type of digitized currency that a central bank issues that is, unlike cryptocurrencies, tied to a given country’s fiat currency. Though they raise the issue of privacy and cybersecurity among others, it is seen as a viable alternative to the current system because it expands financial access, does not have liquidity and credit risks, requires less infrastructure, subtracts the risk of events like bank failures, allows for lower international transaction costs, and more.

The USD’s value has dropped by 8% since the year’s beginning, ushering in a bear market that may foreshadow a recession. The dramatic depreciation of the dollar will likely lead to the incidence of these tariffs falling at the feet of US consumers as opposed to foreign producers, as was intended. Additionally, this will cause upward inflationary pressures, which will weaken the dollar. Nevertheless, as of right now, the 10% baseline tariff will remain in action that was introduced in early April. This was created with the goal of protecting American industry but will most likely result in the average consumer having to pay a higher price for the same goods. The producer has to either pay the tariff or source goods from a more expensive distributor within the US to avoid the tariff. The elasticity of demand for goods is less than the elasticity of supply, so consumers will bear most of the incidence of the tariff because they have to pay the higher price that is passed along to them by producers.

According to Sachs, in the future, the dollar will give way for the rise of currencies like the ruble, renminbi, and the rupee. The beginnings of de-dollarization are already in motion with many different approaches by many different entities to many different ends. BRICS and CIS are already resolving to move away from the dollar to multiple local currencies to keep economic power in their own hands and better insulate themselves from external global economic turmoil and upheaval that is localized to the US, all to avoid putting all their eggs in one precarious currency basket. The “Sell America” movement is gaining traction. This is what investors call the process of unloading a large amount of their US assets to move their investments into a foreign market or other physical assets to remove them from being subject to the tumult of the US economy. This is demonstrated by the Moody Index (an indicator of investment reliability) downgrading the US from the topmost spot to the second-highest spot, showing an international wavering of faith in US investments.

The US trade deficit would send other countries into an absolute panic with its staggering numbers and dire projections, but the country is still operating business as usual despite that because of the extreme demand for dollars and lack of an alternative for other currencies to use in its stead. Without this demand, a crisis is entirely unavoidable. Whether the US pays its debts back or defaults, it will not be good for Americans and their consumption of foreign goods that stimulate the global economy.

Although, due to the deeply set infrastructure that has fostered the dollar’s domination, change will not be fast. Far-reaching change will almost certainly take several decades to rewrite the foundation that the global economy is built on to create a fundamental, lasting change. We may be witnessing a turning point into a new age where the sun sets on another empire that thought it was eternal or this may merely be a momentary wavering of confidence. Time alone will tell.

Sources

https://www.whitehouse.gov/fact-sheets/2025/04/fact-sheet-president-donald-j-trump-ensures-n ational-security-and-economic-resilience-through-section-232-actions-on-processed-critical-min erals-and-derivative-products/ [15/04/25]

https://www.bbc.com/news/articles/c5ypxnnyg7jo [10/04/25]

https://www.geopoliticalmonitor.com/americas-waning-edge-capital-flight-tariffs-and-de-dollarizat ion/ [20/4/25]

https://money.usnews.com/investing/articles/de-dollarization-what-happens-if-the-dollar-loses-re serve-status [15/04/25]

https://www.businessinsider.com/us-dollar-weakness-people-saying-bear-market-2025-4 [26/04/25]

https://www.investopedia.com/terms/c/central-bank-digital-currency-cbdc.asp [06/14/24] https://www.jeffsachs.org/interviewsandmedia/2la6wffhppa2m635akl8pbywr4fdrm

‘Sell America’ Is Back as Moody’s Pushes 30-Year Yield to 5% – Bloomberg [14/05/25]

https://www.rdwolff.com/brics_on_the_rise_countries_ditching_the_dollar_u_s_empire_declines [01/07/25]